Regulatory Updates And Considerations For GAP Providers And Creditors

Guaranteed asset protection (GAP) waivers have always held state regulators' attention, but as vehicle price increases drive up consumer demand for debt cancellation agreements, regulatory scrutiny into such agreements is also on the rise. From multistate settlements and administrator subpoenas to class action settlements and proposed state regulations, lenders will want to keep an eye on recent developments in the calculation and payment of refunds.

Refunds: Who pays the consumer?

Standard industry practice is for the dealer — rather than the lender or administrator — to issue a consumer refund when a GAP contract is terminated early. In audits, regulators have increasingly questioned lenders on refund calculation and payment practices. However, many states' consumer finance regulators only have authority to regulate lenders, not dealers and/or administrators. In recent years — legislatively or in practice — regulators have begun requiring the lender to either